Since 2002, Mercer has conducted a regular survey among retirement schemes in Hong Kong, using a detailed approach to provide insight to employers. We are pleased to present our summary of the key results from the 2020 Hong Kong Defined Contribution (DC) Retirement Scheme Survey.

 

Overall, we observe positivity among employers toward market changes, such as eMPF, and a willingness to explore new elements, such as postretirement solutions and ESG for retirement savings for their employees.

 

In this survey, we have taken an in-depth look at areas including scheme design, investment management, scheme governance, and provider services and fees. The 2020 survey covers both Mandatory Provident Fund (MPF) schemes and the DC schemes set up under the Occupational Retirement Schemes Ordinance (ORSO schemes). A total of 143 companies across a broad spectrum of industries contributed data to the 2020 survey. The results in this report are based on the major open DC schemes of each participating company and the topics we cover include:

 

  1. Typical scheme profile                                                    
  2. Scheme design                                                                  
  3. MPF investments    
  4. ORSO investments                
  5. MPF scheme satisfaction                                  
  6. ORSO scheme satisfaction
  7. Fees                                                                                    
  8. Strategy and scheme governance    
  9.  Termination policies
  10. Retirement policies
  11. Recent initiatives in the MPF market
  12. Impacts of COVID-19             

Key findings

Despite the economic challenges imposed by COVID-19, the survey results show that employers’ retirement benefit priorities have not been affected. Some respondents indicate a preference for conducting member communications and assessing the impact of market turbulence on retirement schemes due to COVID-19.

 

Key areas of focus for employers

 

The survey reveals that the three top areas of focus are:

 

1.       Scheme benefit level

2.       Scheme provider

3.       Investment options

Scheme benefit level

 

Our survey reveals that 75% of participants are providing more than the statutory minimum level of employer MPF contributions.1 (That is, voluntary employer contributions are fairly common, with 75% of participants providing them.) More than 98% of these companies indicate that both staff retention and better retirement protection for members are the key objectives in providing voluntary employer contributions.

Scheme provider

 

Regarding provider selection, the key considerations for MPF are tax-deductible voluntary contribution (TVC) product offering arrangements, fees and communication, whereas the key concerns of ORSO schemes are provider fees and services.

 

MPF

 

Thirty-eight percent of participating MPF schemes have negotiated a fee rebate from their providers. Among the schemes that have negotiated fees, the indicated median fee rebate is 0.25% of assets.

 

ORSO

 

The median fee for ORSO schemes is around 1% of assets. Forty-five percent of participating ORSO schemes have negotiated fee rebates from their providers. Among them, the indicated median fee rebate is 0.23% of assets.

Investment options

 

For the ORSO market, 34% of ORSO scheme respondents review investment options on a semiannual or annual basis. Thirty-five percent of participants have amended their investment options, with 40% adding new options over the past three years. Three-quarters of participants say their schemes have a written policy statement outlining investment objectives. From these responses, it appears employers are generally aware of the importance of investment choices for meeting various needs.

 

Member education and communication

 

Approximately 40% of MPF and ORSO participants offer retirement planning and investment education sessions to their members at least annually or once every two years.

 

Future of retirement schemes

 

In this digital economy, we see that employers look forward to simpler and faster administration, as well as lower fees, as the most desired benefits for the digital standardized platform, eMPF. While the survey revealed that investment choice is among the top three areas of focus for employers, 30% of participants indicate they would consider providers that offer postretirement solutions on their platforms, and 61% indicate a preference for highly rated ESG-themed investment options.


We'd like to thank all the participants this year for their efforts and interest in assessing how well their retirement benefit schemes stand up to other employers’ schemes in the market. We welcome the opportunity to discuss the results further. Additional industry or custom benchmark versions of this report are available for purchase. If you would like to access other information across Asia, please contact us.

 

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